Questions About Soap, Wills, Restaurant Gift Cards, Note-Taking, Dave Ramsey, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Afraid of 401(k) losses
2. Too much retirement savings dangerous?
3. Bar soap or body wash?
4. Online wills
5. Coworker lunch gift card issue
6. Specifics on early retirement
7. Cheap school backpacks that last
8. Home refinancing question
9. Stock grants?
10. Dave Ramsey and Christian advice
11. Taking notes
12. Recipe for lasagna

One topic that people often ask me about is passive income. How can you set up “passive income streams” so that money just comes in and you don’t have to do any work for it?

My experience has been that a passive income stream requires some kind of tremendous up-front investment to work. You either have to put a ton of time and energy into it upfront (like writing a book or making a robust website) or you have to put money into it upfront (investing). There is no magical route to passive investing without that up-front investment, and anyone trying to convince you otherwise is either trying to sell you on some product or got extremely lucky.

I made several attempts at building a truly passive income stream to write about for The Simple Dollar and I never ended up writing about them. Why? They either required absurd amounts of work or money (or some of both) to set them up. Having said that, if you manage to build one, each subsequent one becomes easier as you’ve figured out some workflows and the success of the first one can help launch later ones.

Unless you’re doing the first few as a hobby with no expectations of much success at all, I wouldn’t bother with chasing passive income streams.

On with the questions.

Q1: Afraid of 401(k) losses

My job recently froze everybody’s pensions and started offering better 401(k) matches. Most grumble that it depends on the market that could crash at any time and that they’ve lost $20,000 in the past. It doesn’t register that they gained $60,000 before losing $20,000 or that they regained the lost $20,000 if they stayed invested. What would you say to them?
– Alex

I would simply pull up a long term graph of the S&P 500 or whatever index is most prominently offered in your 401(k) and show them what that looks like. This is a good one. This is another good one, as it shows the 30 year returns of the S&P 500 over time.

If they’re still scared, then suggest that they can put their money into something very safe, like money markets or AAA bonds within the 401(k). Almost every 401(k) offers at least a couple super-safe investment options.

If they then grumble about wanting guaranteed good returns with no risk like they had in their old pension, tell them the truth about it: if they offload all of their risk to the pension program, that pension program runs the risk of just collapsing if there’s a big downturn. This article provides a nice summary, and here’s a history of collapsed pension plans.

I understand the appeal of a pension plan for an everyday worker. It lets people think that their retirement is guaranteed to be safe and guaranteed to grow at a healthy rate without any risk, even when that isn’t really true at all. It’s often true if the pension program is rock solid, but many have failed completely.

The nice part about a 401(k) is that you can choose the risk level of your own investments. If the thought of losing $20,000 after gaining $60,000 is scary, just move your money into something less volatile like bonds or cash.

I’d share all of that information with them: a long term view of stocks, a look at how pensions aren’t perfect, and some investment options that aren’t as volatile as stocks.

Q2: Too much retirement savings dangerous?

Do you think it is bad for America to save too much for retirement? This article has me thinking that if everyone saved a lot for retirement it would tank America’s economy.
– Brett

Just because some financial institutions have made decisions based on the idea that Americans don’t save adequately for retirement absolutely does not mean that Americans shouldn’t save for retirement.

Rather than collapse, what would happen if everyone in America started saving adequately for retirement is that some industries would grow and others would shrink. The investment services industry would grow like crazy, while some of the more frivolous sectors of the entertainment industry and food services industry would probably struggle.

As for the Federal Reserve, if you want to blame the Fed’s mistakes on ordinary people trying to invest for their own futures, you’re barking up the wrong tree. People shouldn’t have to choose not to invest their own money because the Fed can’t plan well.

I don’t buy into any vision of economic collapse as a result of people choosing to save. All that will change is some entities will have to change their policies, some businesses will struggle and other businesses will thrive. If anything worse happens, it’s because of someone’s bad planning, and someone who plans that bad would have made mistakes anyway.

Q3: Bar soap or body wash?

Read in the castile soap article that you use bar soap or castile soap and not body wash. Could you break down the cost a little? Seems like a $3 giant jug of body wash is pretty cheap.
– Anne

This is one of those things where I realized that if I experimented a little and did the math carefully once, I could rely on that result for the rest of my life, and I came down on the side of bar soap or diluted castile soap.

The reason is that if I use bar soap and keep it on a wire rack (or some other kind of rack such that the bar isn’t just sitting in moisture in between showers), the bar lasts for a very long time. Depending on some variance between bars, I get about 10 showers per ounce of bar soap. So, for example, if I buy an inexpensive bar of soap from the store, which is about 4 ounces in weight for $1, I get 40 showers out of it, or a cost of about two and a half cents per shower.

(I don’t use the cheapest soap, mostly because it dries out my skin, but there are a few bar soaps I do use based on price per ounce that I’ll buy depending on sales. Right now, I’m using some extremely large Duke Cannon bricks of soap — more than 10 ounces apiece — because I got them at a really great sale price.)

About the cheapest regular price I could find for any kind of body wash is around $0.20 per liquid ounce. Thus, for body wash to be as cheap as bar soap, you’d have to use 1/8th of an ounce per shower, and I have never, ever tried a body wash that was anywhere near that efficient. I even tried putting body wash in a pump bottle for a while, but you’d have to use only two pumps out of that pump bottle (assuming that the pump is an average 1.5 mL pump) to be as cheap as an equivalent quality bar of soap. That’s simply not enough liquid soap to get my body clean — I tried. Bar soap just wins.

Now, body wash is probably more convenient in most showers, but in terms of cost, inexpensive bar soap is far cheaper per shower by my experiments.

Q4: Online wills

Do you have thoughts on using online wills?
– Mariann

I think that if your will is simple (meaning you’re dealing with fewer than $1 million in assets, almost everything is going to a single person (or divided evenly amongst a few people), there doesn’t seem to be any significant risk of dispute,and the remaining items are personal items going to specific people), then an online will through a reputable site like LegalZoom is perfectly fine.

It’s only outside of those situations that I would contact a lawyer and have them examine the situation and perhaps prepare additional documents. For high wealth situations, you may want to have a living trust, for example, and you may want to consider other approaches if there’s potential for conflict.

For simple wills, though, an online service will more than do the trick.

Q5: Coworker lunch gift card issue

I have this coworker who gets people to go out for lunch with him but always insists on going to a chain restaurant like Chilis or Buffalo Wild Wings or Chipotle or something like that. He’ll usually suggest 3 or 4 and usually, one of them gets chosen. I noticed recently that he uses gift cards there and he says that he buys them in bulk and gets about 20% off their face value. At first I thought this was frugal but now I think it’s kind of crappy that he shoehorns everyone into eating where it’s cheap for him.
– Dana

On the other hand, why don’t you buy yourself some bulk gift cards for those same places so you can eat out with coworkers a couple of days a week and build bonds with them for a lower price?

I’m pretty clear that it’s way cheaper to bring your own leftovers or make your own lunch than it is to go out for lunch, but there’s an undeniable professional and social benefit to going out to lunch with coworkers sometimes. If you already have a coworker that leans into a few chains for which he can get discounted gift cards, ask him where he gets them and get some for yourself. I know that sites like Raise and Cardpool offer lots of gift cards at a discount, for example.

Rather than thinking this guy is doing something wrong (I don’t think he is unless he’s absolutely demanding people eat at a place where no one wants to go), lean into it with him and save yourself some money. If he’s buying them at 20% off, that basically means one out of every five of his lunches is free, and if he’s in some kind of customer rewards program at those places, that can actually add up pretty nicely. It’s still not anywhere close to as cheap as bringing your own lunch, but it’s not bad at all.

Q6: Specifics on early retirement

You have talked a lot in a vague way about what you want to do when you retire, but it sounds like you’ve thought about it in detail. Could you be more specific? I would like a more concrete example to think about.
– Aaron

I sometimes write about some elements of my own life in a vague way so that people can fill in details that are appealing to them, making it kind of their own story, too, and the exact details of what I plan to do when I retire are kind of along those lines.

The day I feel sufficiently financially prepared to retire from writing, I’m going to immediately sign up for a 20 hour a week volunteer position at a local charity. The position isn’t actually volunteer, but I’m going to donate my full income back to that charity. The charity really needs three skills that I’m largely good at: writing, task and project management for a small team, and IT skills. I plan on doing this job about 40 weeks a year, then spending the other 12 weeks traveling with my wife, mostly driving around the country.

In my spare time, I want to lean into the hobbies I already have — cooking, tabletop gaming, reading, hiking and taekwondo. I’d like to eventually be a taekwondo instructor, as many of the older folks in our school eventually become instructors, which would take 5-10 hours a week. I’d also like to run for local political office, on a school board or city council level, and really lean into those. I’ll also spend more time with some of the community groups I’m involved with; I often skip things with those groups simply because I don’t have the time right now, but without work and with the kids moved out, I’d definitely have time.

I have an idea for a couple of books I’d like to write. One of them will require a lot of research; the other (which is fiction) requires some, but not as much. I’d want to put myself on a 2-3 hour a day schedule to get those written, probably during the hours where I’m awake and Sarah is still asleep, as I seem to need 1-2 fewer hours of sleep per night than she does. I feel like I might do these very quickly after I retire, possibly while Sarah continues to work. There’s some likelihood, based on our conversations, that I will retire a couple of years before she does, for a number of reasons, and the two-book ideas are a big part of that.

This stuff would more than fill my days. For me, the “rocks” — the important stuff that couldn’t move — would be the volunteer work and the community positions, with everything else flowing around those things.

I don’t intend to sit at home and do nothing all day, that’s for sure.

Q7: Cheap school backpacks that last

Bought both kids backpacks in August and they’re both falling apart. Are there any cheap backpacks that actually last? Hopefully under $50?
– Sara

Jansport is the brand for the best “bang for the buck” backpacks, in my opinion. For the price, they’re extremely well made.

You can get a Jansport Superbreak for under $30. It’s a really great backpack for the price. I mean, it’s not as well made as some really high-end bags that cost many times as much, but for a kids’ backpack that you want to last for a few years, you’re going to have a hard time beating it.

If you’re buying at a local big box store, I’d basically avoid anything there under $50 that didn’t have a Jansport logo on it. They’re just the only ones I’d buy in that price range.

Q8: Home refinancing question

Hi Trent, got a question about a refi-HELOC combination I’m trying to figure out with my house. I’m trying to refinance our house that we’ve lived in for 5 years. We bought it for $420,000, but with the market here, its value is $620,000 now. When we bought it we also obtained and maxed out a HELOC, and with our down payment, we were able to get the house. Because the HELOC has a variable interest rate, I kind of want to pay it off ASAP. It feels like the debt amount hasn’t budged over the past 5 years. Would it be wise to do a refinance and take out some cash in order to cut into the HELOC amount? We also want to cash out some equity to remodel our bathroom since it is very old. Thanks for any tips or insights you can provide.
– Dennis

If the refinancing can lock in an interest rate that’s as low as — or lower than — the lowest variable rate on the HELOC, then refinancing to pay off the HELOC and lock in that interest rate seems like a good idea.

However, I’m not sure exactly what you mean by “we also obtained and maxed out a HELOC” and “the debt amount hasn’t budged over the past 5 years.” It sounds like you are living very close to paycheck to paycheck. If you just tapped it for some of the initial costs of moving and getting the house ready and then haven’t touched it since then, then refinancing is great.

If the HELOC is financing any aspect of your way of life, then you need to make some changes to your spending before anything else, because you’ll likely just wind up with another HELOC.

Q9: Stock grants?

What do you think about stock grants as compensation? At first, I liked the idea because it felt like my income had a lot of long term growth potential and it made me and everyone else really focused on the long term health of the company. But now I am worried that a good chunk of my income is tied to the performance of other people at the company.
– Nadine

For those unfamiliar, a stock grant basically means that employees are given some amount of stock in a company after working there for a certain period of time. This is usually presented as part of their salary. Many companies will have annual stock grants as an ongoing part of salary — if you worked here for 9 of the last 12 months, you get a stock grant, for example. This is different than a stock option, which just means you have the ability to buy stock in the company (usually at a discount).

As long as the value of the grant plus the value of your paycheck adds up to a healthy income, I see nothing wrong with stock grants. You always have the ability to just sell the stocks as soon as you receive them. If you choose to hold onto them, then you have some vested interest in making sure the company does well over the long haul, as does everyone else who is working there or who has worked there without selling their stock.

For me, it really comes down to the overall compensation. The value of the grants plus the value of your actual pay needs to be at least somewhat competitive or it’s not a good deal.

What if it’s a startup? In those situations, it really comes down to whether you believe in the startup and are willing to really pour yourself into making it work, but in those situations, those stock grants should be giving you a significant portion of the value of the company. If your stock grant only gives you 0.001% ownership in a startup, even if it sells for a billion dollars, you’re still only making $10,000 on the shares.

Q10: Dave Ramsey and Christian advice

I picked up “Your Total Money Makeover” from the library recently and really liked the practical financial steps and the tough coaching but I really, really disliked the heavy-handed Christian preaching. It turned me off big time. Are there any books that go for the same “simple plan with good coaching” style of Dave Ramsey without all the preaching?
– Adam

If what you’re looking for is a financial book with a simple plan and a lot of “tough coaching” but without much Christian proselytizing, the best suggestion I can think of is Larry Winget’s You’re Broke Because You Want to Be. It’s a little old, but the advice is still quite sound, particularly on the “getting out of debt” aspect. If anything, Winget leans even harder into the “gruff coach” attitude than Ramsey does (it was a little bit too much for my tastes).

Another option you might want to consider is Money: Master the Game by Tony Robbins. It focuses much more on investing rather than personal money management, however, and it’s not quite as coaching oriented.

Aside from that, you’re probably wanting to look more at motivational speakers rather than personal finance books. I tend to think that the usual tropes of motivational speech don’t translate really well into books, though.

Q11: Taking notes

How do you take notes on books as you read them?
– Andrew

I’ve mentioned many times that as I read nonfiction books, I take notes on them as I go, and Andrew wanted to know more. My note-taking style has evolved a lot over the years, but here’s what I do these days.

If it’s a Kindle book or a book I don’t mind damaging, I read the book and highlight specific ideas that I want to come back to. I don’t highlight a lot — rarely do I highlight more than one or two sentences every few pages. Rather, I aim for things that I know I’m going to want to try out or dig into more later on, and I know that if I want a little more, I can always re-read the paragraphs around that highlight. I use notecards instead for library books, writing down the sentence on the notecard and sticking it into the book where I read it.

When I finish the book, I set it aside for a week or two, then I give myself about 90 minutes or so with that book. I pick it up again and go through each highlight, one at a time, and ask myself whether this is something that’s really important, either as something I want to dig into further, something I want to try out, or something I just want to think about. If it is, I write down that key idea in a notebook by hand, along with any other details from the paragraphs around it that I might want to think about later.

After that’s done, I make a note in Evernote for each one of those ideas. (Evernote is like a notebook app on my phone and laptop.) I literally take a picture of my handwritten stuff for each idea and create a new note for it, then I’ll type in my own thoughts below it.

That’s usually enough to embed the 10 or 15 big ideas I really want to retain out of that book.

Q12: Recipe for lasagna

Can you share your lasagna recipe with us? The one you freeze?
– Yancee

Lasagna is basically just a sequence of layers in a 9-inch-by-13-inch pan.

I take 6 to 8 ounces of diced mixed vegetables, usually whatever I have conveniently available, for one layer — the vegetable layer. If you want a meat lasagna, replace this with 8 ounces (cooked) of your favorite meat, like Italian sausage. Another layer is a mixture of 8 ounces of cottage cheese, 8 ounces of shredded mozzarella cheese, and 1 egg, thoroughly mixed. A third layer is lasagna noodles, usually about 4 per layer (if you’re making it to freeze, don’t cook the lasagna noodles). A fourth layer is simply pasta sauce, a single 24-ounce jar of your favorite kind.

Take your pan, coat it with just enough olive oil so that nothing will stick, then add the ingredients in layers. Start with a quarter of your pasta sauce, then put a layer of noodles, then a layer of cheese (a third of your cheese mix), then a layer of one-third of your vegetables. Repeat that two more times. On top of that, put your remaining sauce, then put an additional 8 ounces of cheese — I usually put 6 ounces of shredded mozzarella mixed with 2 ounces of shredded Parmesan.

If you’re immediately putting this in the oven, the noodles should be cooked, and you’ll want to bake it at 350 degrees Fahrenheit for about 40 minutes. Cover it with aluminum foil for the first 20 minutes, then remove the foil and the cheese on top will brown just a bit. Remove it from the oven and let it sit on the table for 10-15 minutes before serving so it will set.

If you’re going to freeze it, leave the noodles uncooked. When you pull it from the freezer to bake (you don’t need to give this any refrigerator time), you’ll want to cover it with aluminum foil and bake it at 425 degrees Fahrenheit for 75 minutes, then remove the foil and bake for another 15 minutes, then set it on the table for 15 minutes to set up. The noodles will cook during the baking. With this process, the vegetables will release a little water as it starts to cook and that, along with the sauce, will be enough to cook the pasta in the oven as it bakes.

So, if I’m making several pans at once, I’ll buy lots of cheese, four jars of pasta sauce, three boxes of lasagna noodles, and a bunch of frozen diced vegetables. I’ll only cook about 10 noodles for the batch that’s going to go in the oven, and then I’ll assemble the other three pans while the first pan is cooking in the oven.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.